NLRB Changes Rules for Employee Severance Agreements

Employment Law

NLRB Changes Rules for Employee Severance Agreements

Feb 24, 2023 | Employment Law

On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a significant decision in McLaren Macomb, ruling that an employer may not offer employee severance agreements containing broad confidentiality and non-disparagement restrictions because such restrictions amount to an impermissible waiver of the employees’ rights under the National Labor Relations Act (“NLRA”). McLaren Macomb reverses the Trump-era NLRB precedent set in the Baylor University Medical Center and IGT decisions that had generally allowed employers the use of confidentiality and non-disparagement provisions in severance agreements, provided that the employer had not independently violated employee rights under the NLRA in the decision-making process.   

What prompted the NLRB’s decision?

McLaren Macomb, a hospital in Michigan, furloughed 11 union employees in response to a reduction in elective and outpatient procedures brought on by the COVID-19 pandemic. The hospital had presented the employees with a “Severance Agreement, Waiver and Release,” (“Agreement”) offering them severance if they signed the Agreement. The Agreement contained “Confidentiality” and “Non-Disclosure” provisions that prevented employees accepting it from: 1) disclosing the terms of the Agreement; 2) disclosing employer confidential, privileged or proprietary information learned during employment; and 3) making statements to other employees or the general public “which could disparage or harm the image” of the employer. The Agreement imposed penalties on employees who violated the confidentiality, non-disclosure, and non-disparagement restrictions.

Why did the NLRB change course?

The NLRB based its finding that McLaren Macomb had violated the NLRA, on “nearly a century of settled law, pre-Baylor and –IGT that an employer violates the NLRA when it proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights because such agreements restrain, coerce, or interfere with the employees’ NLRA Section 7 rights to engage in discussions with coworkers about the terms and conditions of their employment or to otherwise improve their lot as employees, to file unfair labor practices with the NLRB, and to assist other employees and the NLRB in its investigative process.  

An employee does not even need to sign the severance agreement for an employer violation of the NLRA to have occurred. All that is required is for the employer to merely offer an employee  a severance agreement such as the one in McLaren Macomb. According to the NLRB, the employer’s act of proffering of the severance agreement constitutes an attempt to deter the employee from assisting the Board and the employee’s conduct in not signing the agreement did not render the employer’s conduct lawful.”

The McLaren Macomb decision is applicable to both union and non-union workplaces. There are some indications in the NLRB’s decision that it was prompted as much by the employer’s over-encompassing language in the confidentiality and non-disparagement provisions, exacerbated by the absence of appropriate Section 7 disclaimer language in the Agreement. Depending on the needs of your particular business, appropriate compliance measures for employers in light of McLaren Macomb could include removing confidentiality, non-disclosure and non-disparagement language from your severance agreements, redrafting the wording of such provisions to narrow the scope of the restrictions, and adding appropriate Section 7 disclaimer language.

What should you do in response to the NLRB’s decision? 

At a minimum, all employers should take this opportunity to review and effectuate appropriate revisions to their severance agreements and other employment-related policies and forms to bring all such documents into compliance with the NLRB’s decision in McLaren Macomb. Bean, Kinney & Korman’s employment law practice group works proactively with union and non-union employers of all sizes, to craft a full range of employment policies and documents, including severance agreements, to meet the compliance challenges of the NLRA and all applicable federal, state, and local laws.

If you have questions about the NLRB’s decision in McLaren Macomb or need assistance with your severance agreements or other employee policies or forms, please contact Doug Taylor at (703) 525-4000 or rdougtaylor@beankinney.com, or your current Bean, Kinney & Korman attorney.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.

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